Sorry if this is a complete noob question but I'm coming from a pc world.

I've downloaded XBMC from the web. It is in my download stack. If I click on it from my stack it opens a window that seems to allow me to put it on my dock. I have opened it, mapped a drive to it, enabled digital audio over HDMI and watched a bit of a video from the mapped drive. All good right?

Except when I close it, the icon no longer appears on my dash board. It is in my download folder. I can't seem to find the install.

So my question is where did it go? Does Mac install the equiv of a program 'exe' as MS systems do or do their programs just run from the file I downloaded? Ie. no install as I'm used to seeing?

I'm not familiar with the XBMC install, but it possible and sounds likely that it is in basically a compressed archive. When you open your downloads folder, open the XBMC file and then drag the actual application out of that onto your desktop or into the Applications folder within your desktop._________________2.3 GHz i7 Mini (stock)
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What you did is you downloaded a disk image. Imagine a disk image as a digital version of a physical CD/DVD. When you download a disk image, you haven't actually installed the program onto your Mac yet, you've only downloaded a digital copy of a CD/DVD.

What you did was you ran the program directly from the disk image (similar to running a .exe file on a PC). You never actually installed the program onto your hard drive you just ran the program from the disk image.

Now...
If you want the program to reside and live full-time on your hard drive, you drag and drop the program onto your applications folder. It will then remain as an application on your hard drive. The disk image is no longer of value. You can drag it to the trash, because the program is installed. This would be equivalent to ejecting a CD/DVD.

I fully understand your frustration, this is one of the most difficult things for Windows users to wrap their heads around when new to a Mac... especially when some programs install differently than others.

The developer created a shortcut to the Applications folder. The application could have also been installed by dragging it to the actual Applications folder in Finder.

Now to make things a bit more confusing some developers have made it so you only need to double click on the program you want to install and it's going to install the program into your Applications folder for you. ie. most Adobe software works this way.

I wish developers would standardize, but the bottom line is the program needs to make it's way into your Applications folder to be installed.